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Financial Structure and Systemic Risk of Banks: Evidence from Chinese Reform

1
Moon Soul Graduate School of Future Strategy, Korea Advanced Institute of Science and Technology (KAIST), Daejeon 34141, Korea
2
HSBC Business School, Peking University, Shenzhen 518055, China
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Authors to whom correspondence should be addressed.
Sustainability 2019, 11(13), 3721; https://doi.org/10.3390/su11133721
Received: 14 June 2019 / Revised: 1 July 2019 / Accepted: 3 July 2019 / Published: 8 July 2019
(This article belongs to the Section Economic and Business Aspects of Sustainability)
Using Chinese data from 2006 to 2014, we find that a shift in the financial structure towards a more market-based structure can reduce the systemic risk of the banking sector. One transmission channel through which this occurs is the improvement in an individual firm’s debt repaying capacity, which is positively influenced by the development of stock markets. Another channel is the enhanced credit monitoring of borrowers by banks, owing to their slower credit growth. Our results imply that the shift toward market-based financial structure could lead to the development of financial market as well as the enhancement of the stability of an economy. View Full-Text
Keywords: financial structure; systemic risk; banking; China financial structure; systemic risk; banking; China
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Ji, G.; Kim, D.S.; Ahn, K. Financial Structure and Systemic Risk of Banks: Evidence from Chinese Reform. Sustainability 2019, 11, 3721.

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